Outlook: Shareholders are running out of time to pay

Given his Labour links, including a stint in government under Gordon Brown, one might have expected Lord Myners to be more supportive of Ed Miliband's recent intervention in the debate on executive pay. Fortunately, at least for the quality of the discussion, Lord Myners is now free from the shackles of government and no longer feels the need to toe the party line.

The Labour leader, you will recall, said last week that companies should have to publish the ratio between the pay of their most highly rewarded directors and their average workers.

It was a very political compromise, designed to give the impression that Mr Miliband shares the popular outrage about out-of-control boardroom pay while sending a message to business leaders that he has no intention of forcing them to do much about it.

In fact, such was the political adroitness of Mr Miliband's manoeuvre, Vince Cable, the Business Secretary, took a leaf out of his book in a speech to an Association of British Insurers conference yesterday. We saw the same sort of language – "ridiculous levels of remuneration are going unchallenged" – and the same sort ofpolicy response; in Mr Cable's case a review of disclosure rules on pay and performance.

Lord Myners, speaking at the same conference, sensibly refused to endorse the politicians' suggestions.

Instead he has a familiar answer to the problem – that excessive executive pay is a matter for shareholders – and a new idea for turning that answer into a real solution – that companies should be required to have shareholders sitting on the nomination committees that appoint their boards.

It's a cute trick. The problem currently is that while shareholders – the large institutional investors that dominate share registers – know they are in theory responsible for holding executives to account, in practice they rarely opt to do their duty (preferring, generally, to sell up if they become disenchanted).

Were we to co-opt shareholders on to the nomination committee and give them responsibility for monitoring the performance of non-executives, they would no longer be able to opt out of their duties as owners. We might at last begin to see the appointment of board directors prepared to stand up for shareholder value on a whole range of issues, including pay.

What both companies and their largest shareholders must realise is that if they do not get to grips with issues such as executive pay, they will sooner or later find the matter taken out of their hands.

Politicians are not best placed to tackle workplace inequality and, though they may not say so in public, they do not want to. But they will feel compelled to do something if shareholders fail to act.